What Is a Cryptocurrency Perpetual Contract? Step-by-Step Exchange Trading Guide

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The 2024 U.S. presidential election has passed, marking the beginning of a new bull market in the cryptocurrency sector—especially following the post-halving surge in Bitcoin. With public figures like Donald Trump expressing support for digital assets and Elon Musk advocating for meme coins like DOGE, investor sentiment has shifted dramatically. Capital has poured into the crypto market, pushing Bitcoin from around $67,618 to over $100,000 between November 5 and early 2025. When Bitcoin rises sharply, it's widely seen as a clear signal: the bull run is here.

Alongside Bitcoin’s rally, altcoins—cryptocurrencies other than Bitcoin—have also gained momentum. For instance, Dogecoin (DOGE), frequently endorsed by Musk, climbed from $0.15 to a high of $0.48. Speculation grew even stronger after reports that Trump appointed Musk to lead a new government efficiency department—dubbed "DOGE"—fueling optimism that DOGE could break the $1.00 mark during this cycle.

While early investors who bought Bitcoin and altcoin spot positions before the rally may already be enjoying substantial gains, it's not too late for others to participate. One powerful way to capitalize on market movements—whether up or down—is through cryptocurrency perpetual contracts.

However, before diving into trading, it’s crucial to understand what perpetual contracts are and how they work. If you're new to derivatives trading, we strongly recommend reading a foundational guide first: What Is Cryptocurrency Futures Trading? A Beginner’s Guide. Understanding risk, leverage, and market mechanics is essential before placing your first trade.

Now, if you're familiar with the risks but unsure how to execute trades on an exchange—how to open orders, set leverage, or manage positions—this step-by-step tutorial will walk you through the entire process of using perpetual contracts on a crypto exchange.

🔧 Preparing to Trade Perpetual Contracts

Step 1: Set Up a Cryptocurrency Exchange Account

Perpetual contracts are financial derivatives available only on centralized cryptocurrency exchanges (CEXs). To get started, you need to:

Not all exchanges offer the same range of tradable assets. Some platforms support perpetual contracts for major coins like Bitcoin and Ethereum, while others include smaller altcoins or meme tokens. Therefore, choosing the right exchange—or having access to multiple ones—is key.

👉 Discover which exchanges offer the best tools for perpetual trading and start exploring today.

We recommend holding accounts across three types of platforms:

  1. A high-liquidity global exchange – Ensures accurate price feeds and fast execution.
  2. An exchange with broad altcoin support – Allows you to trade niche or emerging tokens via perpetuals.
  3. A regulated local exchange (e.g., Taiwan FSC-compliant) – Acts as your fiat gateway for depositing and withdrawing TWD.
⚠️ Warning: Smaller-cap coins often come with higher volatility and risk. Always assess your risk tolerance before trading.

Step 2: Deposit Funds (Convert TWD to USDT)

Since most international exchanges don’t accept direct TWD deposits, you’ll need to convert your New Taiwan Dollar into a stablecoin like USDT (Tether).

Here’s how:

  1. Use a local exchange to deposit TWD.
  2. Buy USDT at a 1:1 peg to the U.S. dollar.
  3. Transfer USDT to your chosen international exchange.

When transferring crypto, always pay attention to the network (or blockchain) used—such as ERC-20, TRC-20, or BEP-20. Both sending and receiving platforms must use the same network, or your funds may be lost permanently.

🔁 Pro Tip: Check transaction fees and estimated confirmation times before initiating any transfer.

Once your USDT arrives in your exchange wallet, you’re ready for the next step.

Step 3: Transfer Funds to Your Contract Account

After confirming the deposit, go to your Assets section. You’ll likely see your USDT in the “Spot Wallet” or “Funding Account.” To trade perpetual contracts, you must transfer these funds to your Contract Account.

This internal transfer is simple:

Your funds are now ready for leveraged trading.

📈 How to Open a Perpetual Contract Position

With funds in your contract account, navigate to the Derivatives or Contracts section of the exchange.

Step 1: Understand Contract Types

Most platforms offer three types of perpetual contracts:

For beginners, USDT-margined contracts are recommended due to their stable pricing and simplicity.

💡 Why avoid coin-margined contracts early on? If your position loses value, you lose actual BTC or ETH—not just stablecoins. In extreme cases, even your original holdings could be wiped out in a liquidation event.

Step 2: Configure Your Trade Settings

Let’s walk through opening a BTC/USDT perpetual contract using ADA (Cardano) as an example.

Key Interface Elements:

Understanding Funding Rate

Funding rates help align perpetual contract prices with spot market values. They’re settled every 8 hours:

Example:
With a funding rate of 0.011% and a $1,000 long position, you’d pay $0.11 every 8 hours.

👉 Learn how top traders use funding rates to time their entries and exits.

Step 3: Choose Isolated vs. Cross Margin

This decision impacts your risk exposure:

ModeDescription
Isolated MarginRisk is limited to the allocated margin. If liquidated, only that position closes.
Cross MarginUses entire account balance as collateral. Delays liquidation but risks total loss.

Beginners should use Isolated Margin to control risk per trade.

Step 4: Set Leverage

Leverage amplifies both gains and losses. A 3x leverage means every $1 controls $3 worth of assets.

Higher leverage (e.g., 10x–50x) increases profit potential but reduces buffer against price swings. In volatile markets, even small dips ("wicks" or "spikes") can trigger liquidation.

📌 Rule of thumb: Start with 3x–5x leverage until you gain experience.

Step 5: Place Your Order

Choose from three order types:

For new traders, limit orders are safer—they prevent slippage and allow strategic entry.

You can also select:

Finally, decide whether to Buy (Long) or Sell (Short) based on your market outlook.

Once confirmed, your perpetual contract is live.

❓ Frequently Asked Questions

Q: What is a perpetual contract?

A: It’s a type of futures contract with no expiry date, allowing traders to hold positions indefinitely as long as they meet margin requirements.

Q: Can I lose more than I invest?

A: On most reputable exchanges, losses are capped at your initial margin thanks to insurance funds and auto-deleveraging systems.

Q: How do I avoid liquidation?

A: Use lower leverage, monitor funding rates, set stop-losses, and avoid overexposure during high volatility.

Q: What does “mark price” mean?

A: It’s the fair value used to calculate profits and prevent manipulation. Trades are not executed at mark price but settled using it.

Q: When are funding fees charged?

A: Typically every 8 hours (at 00:00 UTC, 08:00 UTC, and 16:00 UTC). You can check countdown timers on your trading interface.

Q: Is shorting allowed in perpetual contracts?

A: Yes—traders can profit from falling prices by opening short positions.

Final Thoughts

Perpetual contracts offer powerful opportunities to profit from both rising and falling crypto markets. However, they come with significant risks—especially when using high leverage or mismanaging margin modes.

Always:

👉 Access advanced trading tools and real-time analytics to refine your strategy now.

Remember: This article does not constitute financial advice. Cryptocurrency trading involves substantial risk. Conduct thorough research and consider your personal risk tolerance before making any investment decisions.

Stay informed, stay cautious, and trade wisely.